In September 2015 the news broke that Volkswagen was cheating on emissions tests for diesel engines by writing faulty software code. VW is now facing major backlash. Take a closer look at the consequence of VW’s compliance scandal.
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Situation: VW Cheats on Emissions Tests
For years now, VW has claimed its diesel technology to be cleaner than its competitors. The automaker also insisted that VW drivers could enjoy better performance and improved fuel economy while also making an environmentally friendly vehicle choice. Unfortunately, it turns out that these claims weren’t true. VW’s software was programmed to switch to low emissions during inspections and emissions tests and then return to its normal emissions levels during standard driving conditions. The company did this so that customers would not lose any power or the performance they expected due to lowered emissions.
The software code was used to defeat emission requirements for diesel engines established by the Environmental Protection Agency (EPA). The scandal reveals a significant flaw in the resources available to the EPA for monitoring industry compliance. Currently, American automakers conduct emissions tests on their own and then submit the results to the government. Automakers in Europe and elsewhere around the world can choose who conducts their emissions tests. Reports show that some VW diesel engine models emitted nitrogen oxide levels over 40 times the legal limit.
Approach: U.S. Files Lawsuit Against VW
In January 2016 the U.S. Department of Justice filed a civil complaint on behalf of the EPA against VW. The complaint accused VW of installing illegal software on 580,000 cars, which violated the Clean Air Act. The EPA lawsuit didn’t list a total penalty amount, but it estimated that VW was liable for between $32,500 to $37,500 per vehicle. That could add up to $18 billion in fines, although it’s unlikely that the U.S. government would demand that amount. The goal of the civil complaint is to pressure on VW to fix the problem.
Since then the Federal Trade Commission (FTC) has filed a suit of its own, claiming that VW provided misleading information to its customers. This raises the penalty much higher than $18 billion. FTC Chairwoman Edith Ramirez explained, “For years Volkswagen’s ads touted the company’s ‘clean diesel’ cars even though it now appears Volkswagen rigged the cars with devices designed to defeat emissions tests. Our lawsuit seeks compensation for the consumers who bought affected cars based on Volkswagen’s deceptive and unfair practices.”
Impact and Advantage: VW Promises to Make Things Right
VW has admitted wrongdoing and has demonstrated willingness to work with the EPA to fix the issue. Chief Executive Martin Winterkorn resigned in September 2015, and nine other managers were suspended during the investigation. VW states that only a small number of employees made the decision to use the fraudulent emissions software code. The automaker has indicated that going forward it will rely on a third party to ensure that its emissions tests are fair and accurate.
Other automakers can learn a lot from VW. Customers won’t stand for misleading information, and publicizing fraudulent results doesn’t pay.[/show_to]
